In the Keynesian-cross model, if the MPC equals 0.75, then a $2 billion increase in government...

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In the Keynesian-cross model, if the MPC equals 0.75, then a $2 billion increase in government...

In the Keynesian-cross model, if the MPC equals 0.75, then a $2 billion increase in government spending increases planned expenditures by ______ and increases the equilibrium level of income by ______.

a. 2 billion: 4 billion

b. .75 billion: 1 billion

c. .75 billion: .75 billion

d. 1 billion: 4 billion

business economics

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Answer 1

Answer #1

a. 2 billion: 4 billion

(Increase in planned expenditure = Increase in government spending but increase in equilibrium income > increase in government spending.)

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Answer 2

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